Fitch Affirms CSFB 2004-C3

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed 11 classes of Credit Suisse First Boston Mortgage Securities Corporation's commercial mortgage pass-through certificates, series 2004-C3. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Although credit enhancement for the classes has increased since Fitch's last rating action, the affirmations are the result of pool concentration and adverse selection of the remaining collateral. The pool is significantly concentrated with only 13 loans remaining, the majority of which are in special servicing (11 loans, 95% of pool). The specially serviced loans consist of eight real-estate owned (REO) assets (89%), two that are classified as in foreclosure (4.4%), and one non-performing matured balloon loan (1.5%).

Fitch modeled losses of 63.9% of the remaining pool; expected losses on the original pool balance total 7.9%, including $90.5 million (5.5% of the original pool balance) in realized losses to date.

As of the August 2016 distribution date, the pool's aggregate principal balance has been reduced by 96.3% to $61 million from $1.64 billion at issuance. Per servicer reporting, one loan (0.8%), which matures in February 2024, has been defeased. The one remaining non-specially serviced loan (4.4%) has a final maturity date of June 2019.

The pool is undercollateralized as the aggregate balance of the certificates is $21.1 million greater than the aggregate collateral balance. This disparity of principal balances is due to the servicer recovering Workout-Delayed Reimbursement Amounts (WODRA) from the transaction's principal collections, and per the transaction documents, the subordinate certificates are not written down. Fitch is anticipating that the $21.1 million difference will ultimately result in realized losses.

The largest contributors to modeled losses have remained the same since the last rating action.

The largest contributor to modeled losses is the REO Tower at Northwoods asset (28.2% of pool), an 184,616 square foot (sf) office property located in Danvers, MA, 20 miles north of Boston. The loan transferred to special servicing in February 2009 due to imminent default upon the borrower's request for an extension of the maturity date. The asset became REO in May 2013. The servicer-reported occupancy was 93% as of March 2016, unchanged from year-end (YE) 2015. The largest tenant leases 55% of the property's net rentable area (NRA) through April 2024. Extensive renovations to the building, parking lot, gym, and HVAC systems were completed in 2013. The property is scheduled for auction in the fourth quarter of 2016 (4Q16).

The second largest contributor to modeled losses is the REO Lighthouse Pointe Apartments asset (17.2%), a 270-unit multifamily property located in Palm Bay, FL. The loan transferred to the special servicer in December 2008 for payment default. The asset became REO in December 2012. The servicer-reported occupancy was 100% as of YE 2015, up slightly from 98% at YE 2014. According to servicer commentary, property management has noted water penetration at the property and the scope of damage is currently being evaluated. The loan's debt service coverage ratio (DSCR) continues to operate below the 1.10x threshold due to high expenses. The property is scheduled for auction in 4Q16.

The third largest contributor to modeled losses is the REO Counsel Square asset (12.5%), an eight-building, 109,146 sf suburban office complex located in New Port Richey, FL. The loan transferred to special servicing in November 2012 due to imminent non-monetary default. The asset became REO in October 2013. The servicer-reported occupancy at the property was 78% as of YE 2015, compared to 73% at YE 2014. Approximately 20% of the net rentable area (NRA) expires over the next two years, including the third largest tenant (8.8% of NRA) in June 2018. The property is scheduled for auction in 4Q16.

RATING SENSITIVITIES

The Stable Outlook for class C reflects the class's seniority in the capital structure and expected continued paydowns. Upgrades to class C are not likely due to adverse selection of the remaining collateral and the high percentage of specially serviced loans. Downgrades are possible if expected losses increase significantly. The distressed classes (those rated below 'Bsf') are subject to further downgrades as additional losses are realized.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

Fitch has affirmed the following ratings as indicated:

--$8.7 million class C at 'BBsf'; Outlook Stable;

--$28.7 million class D at 'CCsf'; RE 45%;

--$16.4 million class E at 'Csf'; RE 0%;

--$20.5 million class F at 'Csf'; RE 0%;

--$7.8 million class G at 'Dsf'; RE 0%;

--$0 class H at 'Dsf'; RE 0%;

--$0 class J at 'Dsf'; RE 0%;

--$0 class K at 'Dsf'; RE 0%;

--$0 class L at 'Dsf'; RE 0%;

--$0 class M at 'Dsf'; RE 0%;

--$0 class O at 'Dsf'; RE 0%.

The class A-1 through A-5, A-1-A, and B certificates have paid in full. Fitch does not rate the class N and P certificates. Fitch previously withdrew the ratings on the interest-only class A-X and A-SP certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)https://www.fitchratings.com/site/re/886006

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)https://www.fitchratings.com/site/re/883130

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)https://www.fitchratings.com/site/re/873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011406

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011406

Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160908006627/en/

Fitch Ratings
Primary Analyst:
Stephanie Duski, +1-646-582-4820
Analyst
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

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